Global crisis to slow flat panel sales over the next seven years

TFT LCD producers are slowing pace of capacity expansion due to fall in demand. (CHANDRA BALAN)

By

Staff Writer

PublishedSunday, February 01, 2009

Business and consumer reactions to global economic conditions have changed the outlook for electronic display sales and shipments over the next seven years, according to Displaysearch's latest fourth quarter 2008 Quarterly Worldwide FPD Forecast Report.

The fourth quarter 2007 Quarterly Worldwide FPD Forecast Report from DisplaySearch had projected sales of flat panel displays would grow to $124 billion (Dh455bn) in 2009. That forecast represented information about producer shipment targets and analyst projections based on historical data through Q3 2007. Since then, a normal decline in panel pricing caused by capacity expansion has deepened by a basic change in consumer behaviour in reaction to economic woes.

Consumer surveys and retail data compiled by FPD, DisplaySearch's parent company, indicate that such behavioural changes may persist. In addition, consumers outside Europe or North America face recessionary conditions. Therefore, the Q4 2008 Quarterly Worldwide FPD Forecast Report predicts sales of $124bn will not be reached until 2014, five years later than the Q4 2007 report predicted.

"The difference in predicted sales over the seven years from 2009 through 2015 totals $135bn, representing a 15 per cent decline from the Q4 2007 forecast. Reduced price expectations create most of this difference. The prior report expected an average sales price of $32 in 2008 would decrease about three per cent a year to $26 in 2015. The latest report estimates an average price of $29 for 2008 and expects it will decrease about two per cent a year to $25 in 2015. Over the seven years, the average flat panel price prediction is nine per cent less than the earlier forecast. Unit shipment growth projections have changed less," noted David Barnes, DisplaySearch's Vice-President of Strategic Analysis.

Both forecasts expected flat panel shipments would increase at a compound annual rate of five per cent. The difference comes from a smaller base in 2008. The Q4 2007 report estimated four per cent more units would be shipped in 2008 than the results indicate were shipped. The average diagonal size of direct-view (non-projection) displays is another difference. The Q4 2007 forecast predicted an average diagonal of 10.2 inches from 2009 to 2015, assuming an HD aspect ratio. The latest forecast predicts a larger average diagonal of 10.4 inches over the seven years. Combined with lower average unit price expectations, this implies that producers will obtain 11 per cent less revenue per diagonal inch than expected previously. The good news is that consumers will get more display for their dollar, which makes sense in a more competitive market.

From the standpoint of technology, the greatest change in view comes from TFT LCD. This is the dominant flat panel technology. In 2008, DisplaySearch estimates that TFT LCD panels generated more than 89 per cent of all flat panel sales. The current report expects this share will average more than 88 per cent from 2009 through 2015. Being the dominant display technology, it must bear most of the forecast change. In fact, the seven-year forecast revision for TFT LCD sales totals $136bn, which is greater than the total flat panel forecast change. The current view increases expectations for electrophoretic and related display technologies used in electronic books, which offsets part of the forecast reduction for TFT LCD sales.

From the standpoint of display application, this means most of the forecast change comes from decreased expectations for PC and mobile phone display sales. TFT LCD producers supply almost all of the panels used in these applications. The current forecast revises the seven-year sales total for these applications downwards by 16 per cent because the end products have become commodities. LCD TV and plasma (PDP) TV products are becoming commodities. The forecast assumes the 87 per cent share of TV panel sales obtained by TFT LCD producers in 2008 will vary only slightly from 2009 through 2015.

"DisplaySearch has revised the flat panel sales forecast for TV applications downwards 13 per cent from the Q3 2007 prediction. TFT LCD producers are beginning to react to less optimistic expectations by slowing the pace of capacity expansion and seeking ways to reduce semi-fixed costs, as evidenced by recent industry news," Barnes said.